Licensees fight back in Whitbread estate battle
News that three of Britain's most artful young business wizards are fighting for control of the Whitbread pub estate brings little cheer to an industry that is plagued by problems.
Leading licensed trade watchers predict that the three combatants, Punch chairman Hugh Osmond, Nomura's UK boss, Guy Hands, and head of the Belgo restaurant group, Luke Johnson, are likely to push the stakes up as high as £1.7b for the 3,000 outlets.
Add to that the fact that all three are accustomed to winning, and it becomes clear that the struggle will be a no-holds-barred affair. A particularly sinister aspect is that, amid all the pre-match hype, shareholders' interests have emerged as the most important consideration. No mention has been made of the welfare and interests of the sitting tenants.
In the pubs themselves - which, incidentally, generate the money to turn these fantasies into realities - licensees feel wretched and degraded as they struggle to make ends meet while the unholy trinity of thrusting entrepreneurs talk in terms of billions.
In response, the right-to-buy campaign led by Whitbread Pub Partnership (WPP) lessee Gary McClure, which was dismissed out of hand by the board and backed into a corner, has dug its heels in and come out fighting.
Now known as the Federation of Pub Partnerships and enjoying an income of £600-£700 a day, the campaign is moving up a gear. McClure told me: "We have had a meeting with our solicitor, Julian Maitland-Walker, who is looking at two or three test cases, after which he will consult counsel with the intention of seeking an injunction." He added: "If an injunction is granted, this could hold up the sale for 12 months or more."
This does not augur well either for a smooth sale in the short term or shareholders' profits in the long term. After all, who would want to buy a 3,000-strong estate with the tenants in open revolt? Such a deal would have negative equity written all over it.
Half of the trouble, it seems to me, lies with the pub estate operators who genuinely believe that their position is something very close to divine right. I believe that such a stance is fundamentally flawed.
Of course, it would be naïve to assert that businesses should not be sold for a profit - that is what commerce is all about - but when the profit motive eclipses all other considerations, the situation becomes unbalanced. Had things been different, the Federation of Pub Partners might never have been formed in the first place, but as things stand, they are here, and here to stay.
This does not mean to say that leaseholding licensees have a personal grudge against WPP. What it does indicate is that they are not prepared to put up with things as they are, and that they view new masters in the same light as the old.
Whether it be WPP, Punch, Nomura or Belgo, the groundswell of opinion among leaseholding licensees is that they will continue to pay more and more for less and less, and that no matter how hard they work they will be lucky just to make ends meet.
Consider this: leaseholding licensees and their wives/partners work for at least 12 hours a day, each. If they were to be paid just £4 an hour which is close to the minimum rate, they would attract a joint weekly income of £672, or £34,944 per annum. The reality is the reason why the Federation of Pub Partners was formed in the first place - most lessees are lucky even to survive.
McClure told me: "We are not going to disappear. We are very determined and, in view of the fact that WPP are advising lessees not to join the federation, we believe that we may have already hit a nerve."
As McClure has enlisted the support in recent weeks of numerous MPs, the Liberal Democrat Party, and one-time managing director of Whitbread, Sir Charles Tidbury, it is clear that, unless leaseholders' needs are addressed as a matter of urgency, the bubble may burst and share values could reach the point of diminishing returns sooner rather than later.
David Best is publican of the Bushell's Arms in Preston, Lancashire
